Are you investing in digital advertising but not sure of your ROAS on that spend? Then you need the Credo ROAS Calculator on the right side of this screen (or above this content if on mobile)!
ROAS is Return On Ad Spend, which is simply to say that it is the revenue made from the dollars spent on advertising.
ROAS does not take into account other expenses beyond ad spend, so it is not a full picture of a digital advertising campaign (because we haven’t yet fully automated advertising!).
ROAS is a great metric for advertising professionals to know, however, because it is the hardest metric to optimize. You can always (often?) spend less time and less money on other parts of advertising (such as design or copy), but getting to ROAS-positive is the first step to an ROI positive campaign and advertising program.
ROAS (short for Return On Ad Spend) as explained above is a simple calculation to determine profitability of your ad spend alone. It’s calculated thus:
ROAS is Revenue divided by Ad Spend
ROI (short for Return On Investment) on the other hand is a key metric that many executives ask about, but it’s unclear what they are actually asking for. Thus, it is part of a digital marketer’s job to help them understand what you mean when you say ROI, and to understand what they mean.
Return On Investment is a straight-forward calculation:
ROI is Revenue – All Expenses (including Ad Spend) divided by Ad Spend
You’ve probably heard executives asking about ROI as well when they really mean ROAS, and vice versa.
ROI and ROAS are important metrics to calculate because they are how you know if your advertising is profitable or not.
If you only know one and not the other, you are not getting a full picture on your advertising campaigns and activities.
ROAS tells you how your ads perform overall with driving revenue. It’s the most basic metric to know when advertising.
ROI gives you the full picture on your advertising activities because it tells you if the full undertaking (taking into account ad spend, people, other needs like design) is unprofitable, break even, or profitable (and possibly qualified to scale).